Tax Amendment Act 2024: Highlights

Overview

On 3.5.2024, the Federal Ministry of Finance published the ministerial draft of the Tax Amendment Act 2024 ("AbgÄG 2024") for review. The review period ends on 17.5.2024.

Income tax

Transfer of assets from the company assets of a partnership

Mirroring the transfer of assets of private or special business assets to the corporate assets of a partnership, the amendment to § 32 para 3 no. 2 of the Income Tax Act (“ITA”) provides that the transfer of assets from the partnership into the private assets or special business assets of the taxpayer is to be split into a withdrawal and a sale event. With regard to the "third-party quota" (assets are subsequently no longer to be attributed to the other shareholders for tax purposes), there is a capital gain within the framework of exchange taxation. To the extent of the so-called "own share quota", i.e. insofar as the preferential assets continue to be attributable to the transferee for tax purposes before and after the transfer, the tax book value is to be continued (tax-neutral withdrawal or tax-neutral transaction).

Analogously, § 24 para 7 ITA is to clarify that in the future, even in the case of so-called "unsuccessful" Realteilung (de-merger of assets) (de-merger of assets that do not fall under the Austrian reorganization tax act), there will only be a proportionate realisation with regard to the hidden reserves contained in the "third-party quota".

The taxation of a (proportionate) capital gain or withdrawal must be carried out by those shareholders to whom the assets can no longer be attributed ("third-party quota").

The regulations are to be applied for the first time to transfers with a cut-off date after June 30th 2024.

Tax-neutral switch to start-up employee participation

If employees of a start-up are to receive capital shares covered by § 67a of the Income Tax Act instead of virtual shares ("phantom shares"), the non-cash benefit from the redemption of the virtual shares would have to be valued and taxed.

In the period from 1.1.2024 to 31.12.2025, there should be the possibility of a "switch" from phantom shares to a start-up employee participation scheme in accordance with § 67a of the Income Tax Act  without immediate taxation of the non-cash benefit. All the requirements of § 67a (2) of the Income Tax Act must be met.

Corporation tax

Restriction of the offsetting of losses in the event of "pulling up" of the group of companies

Pre-group losses of the (new) group parent can no longer be offset to the extent that these include depreciation to the lower partial value and losses on the sale of shareholdings in corporations that already belonged to another group of companies at the time of depreciation or sale. This also applies to sevenths amounts not yet considered pursuant to § 12 para. 3 no. 2 Corporate Income Tax Act (“CITA).

The new regulation is to come into force immediately upon publication and will be applied for the first time to groups of companies for which a group application is submitted after May 3rd 2024.

Waiver of Attribution of Losses of Foreign Group Members

The AbgÄG 2024 provides for a waiver option for the attribution of losses of foreign group members. The waiver is to be exercised anew for each financial year and refers to the entire loss of the foreign group member of the respective financial year. The waiver of attribution is to be possible for the first time from the assessment for the calendar year 2024. If the attribution is not waived, there will be no changes to the existing provisions.

The waiver of attribution may be particularly relevant for groups of companies falling within the scope of the Minimum Taxation Act.

Digital tax group applications

In the future, the tax group application can (also) be submitted electronically via FinanzOnline. The official forms must be signed by the legal representatives of the group parent and all domestic group members to be included by means of a qualified electronic signature and uploaded by the group parent using the function provided for this purpose. The new regulation is to come into force on January 1st 2025.

Assessment of low taxation within the meaning of § 10a or § 12 (1) no. 10 of the Corporate Income Tax Act 

The draft of the AbgÄG 2024 provides that in the future the recognised national supplementary taxes to be levied within the framework of the Minimum Taxation Act must also be considered for the assessment of whether the foreign recipient is subject to low taxation within the meaning of § 10a or § 12 (1) no. 10 of the Corporate Income Tax Act.

Value added tax

Tax exemption for food donations

In the future, the donation of food (Annex 1 to the VATA) to charitable institutions which are beneficiary per  decision (“spendenbegünstigte, mildtätige Einrichtungen”) is to be exempt from VAT while retaining the right to input VAT deduction. For income tax purposes, the residual book value of the donated food is a tax-deductible business expense. The changes are to come into force from January 1st 2025.

Extension of the small business regulation

The small business limit is to be raised to EUR 42,000 (instead of EUR 35,000 previously).

Furthermore, from 2025 onwards, it will also be possible for companies based in Austria to make use of the small business regulation in other member states. Conversely, the exemption for small businesses is also to be applicable in Austria for entrepreneurs operating in another Member State upon application. The prerequisite for the exemption is that the EU-wide annual turnover in the previous year and in the current year has not exceeded EUR 100,000.

Federal Fiscal Code

Procedural changes in the case of dual-resident corporations

In the case of corporations with their registered office abroad and the place of management in Austria, settlements must in future be addressed to the dual-resident corporation itself. This applies to the extent that it is liable to pay the tax under the tax provisions and the provisions applicable to legal entities are to be applied mutatis mutandis. This also applies if the foreign corporation is not to be treated as a legal person under the provisions of Austrian civil law due to lack of legal capacity.

If the registered office of the corporation is in a third country (e.g. British Limited), there will be an unlimited liability of the shareholders for the (domestic) tax debts in the future.

Deadline extension applications for tax returns

Applications for the extension of tax return deadlines could previously be submitted without restriction within an open period. This possibility is now limited and in the event of a rejection of an application for an extension of the deadline for submitting a tax return, only a one-time grace period of at least one week is to be granted.

VAT Interest Credit

In implementation of the CJEU case law, interest on VAT was introduced. However, if the underlying "pre-debit amounts" have not been paid (e.g. due to a valid suspension of collection), no interest on differential amounts is to be paid in favour of the taxpayer in the future.

Result

From the perspective of taxpayers, the AbgÄG 2024 contains positive changes, but brings tightening in the area of group taxation, which is to apply as early as 2024. The resolution of the AbgÄG 2024 by the parliament can probably be expected before the summer break.